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News/Business. Becky Quick, Joe Kernen, Andrew Ross Sorkin. Business news and talk as the trading day unfolds on Wall Street. New. (CC)

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Us 29, Washington 22, Lamar Alexander 13, U.s. 9, Berkshire 8, Sandy 8, Steve Liesman 8, Adp 8, D.c. 8, Arthur Brooks 7, Sokol 7, New York 7, Becky 7, Jared Bernstein 6, Joe 6, Europe 6, S&p 5, David Sokol 5, Starbucks 5, Schwab 5,
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  CNBC    Squawk Box    News/Business. Becky Quick, Joe Kernen, Andrew Ross Sorkin.  
   Business news and talk as the trading day unfolds on Wall...  

    January 4, 2013
    6:00 - 9:00am EST  

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good morning. welcome to jobs friday. economists expect a report to show steady hiring despite uncertainty about the fiscal cliff. it's january 4th, 2013. "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. we have two guest hosts with us on set this hour. we need this as we get ready for the countdown to the 8:30 eastern report. we have bob bruska joining us. also, jim hoey. we're ready to go and we need your help as we get through these numbers. we are looking for the jobs numbers to come out at 8:30. forecasters say the economy probably added about 160,000 jobs last month. the unemployment rate is
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expected to hold steady at 7.7%. you have a few economists who revised their predictions, moving them higher after yesterday's strong adp report. forecasters at goldman sachs are now expecting a gain of 200,000 jobs. credit suisse is calling for 185,000 nonfarm payrolls and the u.s. equity futures are barely budging at this point. they're going to wait and see what happens at 8:po been right now, s&p futures are unfractionally. this is coming after modest declines yesterday following two strong days of gains. >> and, of course, the other big economic story we're talking about this morning is the fed. the markets were surprised by the minutes from the fomc meetings. the notes showing several policymakers would like to stop the fed's bond buying program before the end of the year, citing concerns about financial stability and the size of the balance sheet. the news prompting some to speculate about an early end to the central bank's four-year stimulus program and the threat of higher interest rates ahead.
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yields on 30-year bonds hitting their highest level since may following the release of those minutes. >> 1.9? >> yep. >> we haven't seen that in a -- i can't even remember when was the last time. >> i just feel like we were just talking about 85 billion a month and then we did that times 12, that's a trillion a year. and they're going to expand the balance sheet a trillion a year? >> no, they're not. >> wasn't that just -- >> but i don't understand how you can say we're doing this and -- >> through 2015 and then say maybe we're not? >> well, maybe they feel like things are start to go improve and -- >> why were they panicking a month ago, though? >> there were a lot of questions. >> they had very good reason to panic a month ago. what they didn't put in the minutes is we have to be very stimulative now in case these people in washington, d.c. take us over into a recession.
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>> we're talking about the debt ceiling. >> what they also couldn't say is once we get to a bad june and the risk that washington, d.c. will destroy the economy drop, maybe we don't have to be so aggressive. but they can't admit that the roept they buy it this way is because they have -- but these minutes were before the fiscal cliff. >> i think the fed was so easy in part because -- >> oh, we should feel so good about what they came up with. no spending cuts and a just a big tax increase. gosh, they did such a great job. can you imagine the guy that will take a victory lap for not addressing our spending problems one iota? obama, how can you say you won and, gosh, be smiling and patting yourself on the back. >> because he defined the problem as not having enough tax revenue. but now we can see right after they do the cliff, we have s&p,
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moody's, the imf coming out and saying, this doesn't come close. the problem all along has been spending. t the republicans got the right issue and the wrong chart. >> the chart yesterday showed that the 65 billion this will raise in taxes and the 1.2 trillion that the shortfall is. it showed it in a bar chart. that's our victory. it was like this, 65 billion here and 1.2 trillion. it did absolutely nothing. >> that is slightly true. but it was the arson that started the fire and before they showed up, they put out the fire and nobody was killed. they created this for their own
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purposes. >> i don't think the fed sat around and said we have to do 85 billion a month just so the congressional parties can screw up? >> you don't think -- >> what's that? >> so they do one month of 85 and then say, oh, never mind? >> no. they had the centers all along. >> they will go another nine months, 12 months. but the markets are starting to say, oh, maybe i have to start thinking about what is the right produce for bonds. >> you have a crisis every two months. why wouldn't they do the same thing now if they're going to be here with -- >> that's why they're not going to stop until washington holds out? >> he hasn't changed his mind. he's had that view for two or three years. >> if the captain of the titanic could have made the iceberg smaller, he would have. there are some guys at the fed that want to make the iceberg smaller. they've always been there.
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they're there. >> i thought we were going to do it so that was a lie about 6.5% unemployment? >> no, that's not a lie. >> we're not at 6.5%. we're not going to be there when they stop. >> there's a distinction again the rules for raising the fed fund rate, linked to the 6.5%, and the rules for quantitative easing which are explicitly not link to do 6 of.5%. >> there's two things going on. until 2015. that's the fed fund rates. >> they didn't say they do the 85 billion until we got the 6.5%? >> no. and they've been explicit that that snoot what they're supporting. >> what does that mean for you and the bond market, though sfp. >> the bond market is in the early stages of bear market. we're not going lower than 1.4%. we've made the low. it's down if from 16% 30 years ago. it's over since three decades of
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a bond bull market and it's over. >> but you're saying we averted the fiscal cliff is the only reason because it was a headwind fake, anyway, with the 85 billion. >> the fed didn't know that washington, d.c. wasn't going to cause an avoidable recession. >> so the economy is not better than it was when they thought -- >> no, but it's lower rick. the long tail risk ves dropped just as in europe when dral draghi came in and said, i'll do whatever it takes and the long tailed risk dropped. the extreme risk has dropped and it will drop further once they get through the debt ceiling and all that stuff. by about june, the u.s. long tailed risk from washington, d.c. doing something really, really third standard deviation stupid and only going back to one standard deviation stupid will lower the risk to the
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economy. >> what we did do was lock in 98% of a revenue which we used -- we've taken that auflt table and it's gone. >> yeah. >> it's gone. so the fed is -- >> no, no, the fed will lower its -- >> it doesn't seem like a very good deal. the deal that came out would -- >> it's a negative -- >> the deal that came out would make me feel less inclined to stop the 85 billion. all it did was it delayed for two months and we're never going to get that money now, the 98%. >> the fed has been waiting long-term treasury bonds. if i manipulated a stock, i would be indicted. but because they're the government, they're manipulating down long-term yields because they think it's helping the economy. >> not to mention the dollar. >> it's not really so much the dollar. it's the long-term treasuries manipulating the dollar. and the ten-year treasury is higher than the manipulated price that they have generated
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by buying at a trillion dollars a year pace. >> they've been doin' incredibly accommodative stuff for three or four years. i certainly wouldn't take it away based on a -- what they call a revolution. >> but there are lower risks to the fed than taking it away once we get past the severe washington, d.c. risk that the people in washington -- >> which one are you talking about? the sequester or -- because going back to the tax rates, they were supposed to sunset eventually. >> the bear case was that washington, d.c. would dlafr 5% of gdp negative fiscal chalk. but you never know with the people in washington. it's a long tail risk of washington, d.c. driving us into a recession has dropped and will drop further by the middle of
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2013. >> this doesn't give me a lot of confidence. you're helping with fed. you're explaining their crazy action, but that doesn't give me a lot of guidance. >> maybe you should join the fed. you can be in there with a lot of these oerts guys -- >> he's trying to explain -- >> no, it's -- >> i don't think this thing is a brilliant idea. it is a dumb idea, but it is what their policy is. >> we're not going to look at markets in asia any more. and look what we got in the stock market. are you ready to sign on for 15,000 on the dow right now? i think we've gotten what we're going to get. don't you think? >> 13-3. >> i thought that the first week of january still goes the rest of the month and the rest of the year and that's how you play the game. >> do you feel all of a sudden that it's clear sailing? >> not after talking to this gentleman. >> it's been a bull market for three years. it's trended higher. every time somebody creates a disaster scenario, it doesn't happen the. think of all the disaster
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scenarios that were going to cause the market to crash and none of them worked out. >> bob, we'll have you on alone next time. >> stop. >> i used to say huey, but it's hoey, like joey. the s.e.c. giving liberty media the green light to take control of sirius/xm. it's effectively acting as sirius' owner over the past few months. they initiated a stock buyback program of special dif dens. officials managing the ivent say the rig has still none of the 155,000 gallons of fuel and other oil products aboard. the rig remains upright and stable, not far from kodak island. and boeing likely to regain its status as the world's number one
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aircraftmaker, topping rival for the first time since 2002. boeing says it delivered 161 planes per year. the company is ramping.its sales of conceivablconceivable. we have heard from hp, and it's not very often that you get strong words from a company coming back. but it has its thoughts about the company and this column. the company's viewpoint says in art, "the wall street journal" story is significantly misleading. hp continues to make significant improvements in both its cash flow from operations as well as 80s balance sheet. he goes on to say that the added significantly to generation. this is not accurate. as we explained prior to its story, hp would have received
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the cash directly from customers in any event. it is important they go on to note that the purpose of these receivable sales programs is to support our partner and customer ecosystems and it is consistent with the practices of many other companies. finally, they say we are at a loss to explain why "the wall street journal" published a story that misleads its readers. it's not very often that you hear such a strong rebuttal coming out from a company, but they feel they were wronged in this situation. >> tell me about corporate news. we haven't got there yet and maybe we'll get there later in the program. do you see the news on david sokel? >> yes. he was cleared. >> cleared of any wrongdoing. >> by the s.e.c. and, obviously, david sokel we had hear. >> we know it defacts in the case where we know exactly how
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it happened. >> he was cleared by the s.e.c. >> we know exactly what he did. and it's just -- i don't know. i don't get anything out of this that he was cleared, that they could find no evidence of wrongdoing. >> well, they investigated for a long time. the question was were they going to bring charges against him? and. >> but what additional information did they need to know? it's like a judgment call. that is buying millions of dollars worth of stocks. and buffett thought he had owned it for a long time. but he bought it, took it to buffett and said you should buy this company and made a huge profit while he owned the company. >> while he was working a total. when we had him on, i said, you can't tell that this smells really bad and it's not fair and you're in there ahead of
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everybody? you can't figure out that this was -- >> again, this is stuff du while you were an officer of berkshire, we were being paid to operate the company. >> he said we've said all along that there was no wrongdoing here and we're glad to be vindicated. we know exactly what the facts of the matter were. and if you want to decide that he wasn't guilty, fine. >> the fcc sdicht r doesn't say no, we're right. but -- >> the fact that the whole situation hasn't changed. and you look at it and it stinks to high heaven. this is why we had a financial crisis and we have had only two indictments and nobody -- people think that obama is this great guy and the republicans are the bad guys. obama runs the justice department. they have successfully prosecuted nobody in the financial crisis. zero, sill much.
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nobody. >> you said sarbains oxley should have been able to get a lot of these guys. >> yeah. so the hurdle for finding people guilty of fraud or misdoings in financial markets is so high, people give you, well, i didn't know know. look at karzai. >> berkshire came out with an internal report which they published that laid all this out. this is here on a silver platter, we think this is not right and the s.e.c. says, well, maybe this is -- >> but you're right. it's thinking they could win. >> you'd have to go and look at lawyers and say here is this statute. can this apply here? that's the problem with the letter of the law and the spirit of the law. the spirit of the law, to me, looks like it was violated in this case. >> berkshire's own bylaws were violated. >> and that is why i thought the
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s.e.c. could bridge a case, but you get a jury on a juvenlg and was he stirred that could get this. and then someone on the other side says, well, i'm not sure. >> they'll never really know but in announcing they were interested, you could have sold your shares after that. >> but he didn't. i'm just saying, if you're on the side of david sokel's defense, i can see how that would work. >> you don't want to spend two years and not get a conviction. >> anyway, sorry to take us off track. it is time for the global markets report. are ross westgate is standing by in london. ross. >> hi, andy. good morning to you. global markets this morning, a little weaker ahead of the
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employment report. not by much as you can see, decliners outpacing advancers by about six to three. we bounced off the lower session for the day around 30 minutes or so ago. take a look at the indices. the ftse 100 closed at a fresh new week high. disappointing data out for the uk. services pmi coming in weaker than expected. we contracted. we thought we would get a better expansion. but we contract ed skomg in around 48 this morning. that suggests the uk has contracted in the fourth yaerter quarterback perhaps by .2%. so the words triple dip are being uttered in the uk. the sweat ya dax down .0.2%. the cac 40 down 0.47%. gilt yields have been heading
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higher. we've got gilt here. 2.098%. like treasuries, they're off to tresh eight-month highs on that yield. and, of course, we've been looking at a stronger dollar across the board. the real standout here has been dollar/yen. 88.26. there's now this continuiing expectation that the bank of japan will come out. this cross rate is very much on fire after the move that we've seen towards the end of the last year, as well. >> thanks, ross. excellent. have a great weekend, ross westgate. coming up, we're going to -- ross westgate. all right. we're going to head to the trading pits in chicago and say what the markets are going to see about today's jobs report. first, if you're looking for a place to retire, we have a story
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for you. ecuador is ranked as the top foreign retirement destination for north americans for the fifth consecutive year. the reasons include the low cost of living, a balmy climate -- >> i thought you were going to say jamaica, given the music. >> yeah. the music. you've been scouting some property down there. >> in jamaica. >> panama, malaysia, mexico and costa rica round out the top five. obviously, the cost of living has a lot to do with -- and i guess climate. but we could have a night climate here in emergency emergency. love you, john. y progressive customers. i plugged in snapshot, and 30 days later, i was saving big on car insurance. with snapshot, i knew what i could save before i switched to progressive. the better i drive, the more i save. i wish our company had something this cool. you're not filming this, are you?
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welcome back, everybody. let's get to today's national forecast. reynolds wofld, it's good to see up. >> today's weather in parts of the northeast not too bad for you. plenty of sunshine. expect the temperatures to be in the 30s. the southeast, pretty nice. showers possible for parts of florida. and in texas, texas of all places will get some rain, even some sleet and some snowfall in west texas. northern plains, just cold and you might imagine, very dry. but out towards the west, what we have for you in the great basin, nice and dry in san francisco. 65 in san diego. low 60s mainly for you in los
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angeles. seattle, scattered showers early. but into the afternoon, might get a break of sun here and there. overall, fairly nice conditions. travel issues, you'll have them at the smaller regional airports in parts of new york and back into pennsylvania. dallas, ft. world, could have some backups there, as well. >> why do you give us the info on the small -- is that for sorkin, the private jet airports? >> always thinking about sorkin. >> i like that. >> i like to include everybody. >> you do. so you're going to talk about teet teeterboro and west chester? >> absolutely. >> all right. >> you've got to have teterbor o in there. >> thanks, reynolds. some squawk sports news, oregon beating number seven kansas city in the fiesta bowl last night. de-anthony thomas returned the opening dickoff.
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the ducks finished the season 12-1. now back to the markets and expectations for this morning's jobs report, joining us from the cme, joe kinneman and in studio, we have bob bruska and dick hoey. joe, so i even question, if we have a good jobs report, i'm not even sure that that does it for equities. if we -- >> it's the number this time. it's going to be messy, right? >> yeah. but is that all there is? is that all there is? did we get it already for the cliff? this is it? >> i think there's a lot of risk here to the down side, i think, actually, on this report, joe. this one is so messy because you had hurricane sandy in there. you had the seasonal adjustments that recently changed how they equate the unemployment rate, etcete etcetera. so i think overall that this number has a great potential to miss. we saw a nice report out of adp yesterday morning.
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it really didn't have as big of an effect as you might think because of the great rally the day before. so to your point, i actually think that there's a little bit of risk that if we miss on the downside, we can be bullish here. if we miss on the sps, many of the traders are looking at a s&p future, so many people think we have to go up and test 1474.51. that would by about a 150-point rally. but -- and if you look at the volatility and the vision being at a low level, tlt a lot of the market numbers are telling us that we should rally. but, again, this number is going to be a very interesting one to watch after last month's number was a bit on the dull side. the one thing i would say is it's nice to get back to watching normality in the market rather than watching d.c. all day. >> i think we're still there.
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and the deal that we got averted something on january 1st, but the whole fiscal abyss is more prominent than ever. the point that we keep making this week is we've just taken 98% of where we used to get some revenue, if that's what we need. that's off the table permanently now. so what do we do to try to close a trillion dollar budget deficit? if the markets want certainty and if corporate cash managers want certainty, i don't see how this deal really helped that much. anyway, we only have 20 seconds. go ahead. >> i agree with you on that, joe. i will say two things really quick. one of them being i've heard a proposal for every dollar you want to spend, you have to cut a dollar. in the kernen household, i have a feeling if you ran into a budget problem, your wife would just sago and make more money. >> we'll have more right after this. . tdd#: 1-800-345-2550 then tonight, i'm trading 9500 miles away in japan.
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good morning and welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin. our top stories, the jobs report. forecasters say the economy likely add 160,000 jobs last month and the unemployment rate is seen holding steady at 7.7 pefrs. in our headlines this morning, forker berm shire hathway ceo david sokol will not face any action from the s.e.c. this is according to his lawyer. sokol resigned in 2011 amid questions about his stock purchases. he joined us on the set the morning after his departure from berkshire. >> i don't believe i did anything wrong. i was making an investment that i believe in.
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frankly, if i believe in something -- if i don't believe in it, i wouldn't recommend it. >> again, that was the morning after. there were a lot of questions that were raised in that interview and in the months beyond that. we did talk today about how berkshire looked into it. they res leased their own investigation where they said it was definitely not -- >> but later as the uproar continued, he kind of backed off. >> he said originally that he thought that this was a long-term holding. >> and that was the new information that he got. >> he did not realize -- >> and that in my mind that changed -- >> i think he thought that was bringing it. >> when sokol resigned, did he resign -- i remember -- and i have to go back and look at it. does he resign on his own volition initially or was there a nudge in this and it was never fully explained how we got there? >> he kind of had to. you think so?
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i think buffett can give you a look and you know what -- >> that's what i'm saying. gives you the look and you do it. >> right. >> and or was there is look or was there no look? >> there was a look. >> i think there was a look. but if i remember the first letter, the suggestion was there wasn't a look. later, it clearly became not just a look, but a stare down. >> probably. incident didn't -- you know, it was a pr hit for warren, there's no doubt. >> he had been a closely valued employee. >> and for berkshire. the internal controls of berkshire. >> does the exchange the equation given that the s.e.c. has decided not to take action, does it change anything about what you would have done about this then? >> i don't think so. i think they've been pretty open in saying that this was a violation, there was wrongdoing there and in their eyes, there was a problem. >> although you heard -- it's like when we have an analyst on this that recommends a stock and
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then you find out that he owns it and he's like, yeah, i own it. that's why i'm recommending it. >> what you're failing so mention there is that by sokol taking the big position, selling it to berkshire, he made money at berkshire's expense. as an officer of the company -- >> he made more money than the berkshire shareholders. >> he made more money than -- >> yeah. you figure it's a zero sum game in something like that, isn't it? the people that sold the shares not knowing that there was going to be a berkshire offer, they sold for a price without the knowledge that he had that there was going to be a -- >> from lubrisol. >> right. the people that owned it in their -- right? those people, if they had the same information that he had that berkshire was going to make a bid, they wouldn't have sold it for $40 less. >> he didn't know for sure that
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warren would take the deal. >> and that i imagine would be his defense. in any event, let's talk more about the debt ceiling. the debt ceiling is the next fiscal cliff and the congress now has two months to act. joining us now is benjamin salisbury. he's the senior policy analyst at fpr capital markets. good morning to you. >> good morning. thanks for having me. >> there's a cover on the economist today that talks about what just happens, says america is turning european. why should developing countries trust american leadership when it seems incapable of solving anything at home? whoot while the west foremost democracies stay paralyzed, china is making decisions in moving ahead. this week president obama claimed that the fulfilled his mandate by raising taxes on the rich. he and his leaders are building brussels on the potomac. a, do you believe that? and how important is that?
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and, b, is that going to get fixed anytime soon in terms of the next two months in terms of how we are being perceived? >> so i don't think the analogy is especially helpful, but the fundamental facts are as described. so i think what's important is as we look at the next couple of months, congress is going to be focused exclusively on the fiscal challenge that they face. and the real problem here is that there isn't necessarily a combination of tax increases and spending cuts that can, quote, solve the problem. and so the extent to which congress addresses one side of the equation, it creates a problem on the other side of the equation. and so that is the challenge that congress faces. it's an intractable problem and there is not an easy solution. and so if you want to make that analogy to europe where you have to put in -- the word nobody uses in washington is austerity. that's not something anybody is interested in. the plan is to achieve growth, to drive up revenue.
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and whether congress can tlet thread that needle is the fundamental question. >> don't you think the problem is the republicans already gave up what they had to give up, which is the tax hikes, the hikes in tax rates. and now you need the spending cuts. now what has to happen is the democrats have to give in and not get anything. spending is really what's out of line. you look at the cdo projection webs it's very clear. now the democrats have a problem. how are they going to give in, capitulate and have this idea that they bargained for something that they actually have to give up? >> well, so there's a couple of things. so i wouldn't necessarily start with the fact that the democrats have gotten all that they want to get. the president asked for about $1.6 trillion in tax increases and he got .6 trillion in t$.6 increases. so there's at least another $1 trillion in revenue increases that are going to be on the table. add to that the fact that we're really not even talking about corporate taxes yet. and one of the important things that i want -- that i think is important for investors to understand coming through this
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is it's unlikely -- they're going the need somewhere between 1.2 and $3 trillion to stabilize the debt to gdp ratio. and the debt to gdp ratio is the crucial question here. so they need somewhere in the neighborhood of $2 trillion to stabilize the debt to gdp ratio. they're unlikely to koum couple up with that $2 trillion in the next two months. that means that they're probably going to end up doing another punch or another extension and that gets you to the point where you say, why aren't we including corporate taxes in this discussion? >> right. >> and the chances of getting corporate tax reform have dropped as a result of raising the top marginal tax rate to 39.6. >> do you agree with that, benjamin? >> because of the linkage between the subchapter s and corporations. i think tax reform is now off the table. corporate tax reform is off the table and individual tax reform is off the table. this deal on the tax bill put a spike through the heart of tax reform, both individual and
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corporate. >> so you may -- you're absolutely correct if you're focused on the idea of tax reform, this idea that we're going to clean up the entire corporate tax code and start from scratch and get a win-win scenario that is revenue neutral, that promotes growth, that normalizes the -- normalizes the effect of tax rate across industries. however, when you start loopg in different parts of the conversation, then you say, well, the president's budget is going to come out in february and you're going to have to, again, say why aren't we getting more revenue from the companies? people are going the talk about mlps. there's a lot of stuff in the new year's eve deal that went directly to a lot of specific industries. do we need that? can we phase out some of these other taxes? and that's how you knowledge your way in. the taxed on capital yapal gains and dividends both went up on new year's eve and people were happy about it. what they were doing was removing a risk. you can back into that conversation by saying, we can
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close loopholes. we're not going to do it as bad as we saw it, so, therefore, you're happy and we have corporate revenue. that's the risk that we have to start looking at. >> benjamin, this is a debate that's going to continue. we'll have you back to continue that discussion. >> thank you. coming up, bond yields rising following yesterday's fed minutes. we'll ask if that print is going to continue, next. but your erectile dysfunction - you know, that could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess with cialis. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, seek immediate medical help for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision,
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welcome back. some traders are speculating about an early end to the fed's four-year stimulus program following yesterday's fomc minutes. joining us now, greg mcbride of bank rate.com. we had a big discussion yerl, greg, that maybe they didn't really mean it, that they were sort of worried about the fiscal cliff and they wanted to make sure that they were seen as providing, i guess, a put of
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some sort and that now that we got through that, that they can -- they don't need to -- they have the pedal to the metal as much as before. is that what happened or did the economy improve? >> i think the fed has the pedal to the metal because of the looming debate and the credit rating downgrade if they don't go far enough on the spending cuts. so we've solved relatively little. and i agree that the uncertainty, be it the fiscal cliff or the debt ceiling is why the fed took aggressive action, not just in december, but back in september. but i don't think they're going to be able to ease off, really, until the second half of the year and that's provided that the economy continues to improve. >> as a deal has evolved and we've had time to think about it, we did avert the immediate sequester cuts and we averted some of the shock of that. but, you know, you look into the numbers, the details themselves, that huge base, that 98% base that the clinton -- that president clinton was able to work with, that tax base of 98%,
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that's permanent now. where are we going to get -- the 2%, there's not enough money there to make up for that 98% that we're never going to get again. why would people be looking at this deal and saying, i feel better? >> i think what we've seen this week, whether you're looking at equities or the rise in bond yields is just the sigh of relief. the fact is, you have to talk about spending cuts at some point. it's going to be particularly contentious. and, you know, i think markets are going to get nervous fairly soon. >> wa kind of respite is that? we'll be worried next week, i'll bet you. >> absolutely. i totally agree, joe. and i think that's why the fed is, again, $85 billion a month is kind of the pace they need to keep up, giving this looming uncertainty and how we lurch from one deadline or crisis to the other. >> they were just acting like maybe they realized it's ludicrous and they're going to continue with the 85. >> yeah.
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they didn't have the luxury of sitting back and doing nothing. they had to do something. all the fed's best ideas were used up several years ago. each successive step, whether it's quantitative easing or anything else is less effective than the previous. but they don't have the luxury of sitting back and doing nothing. >> andrew. >> i'm getting -- i don't know. even though it's a friday and even though it's bengals -- i don't know, greg. >> america's future, success will muddle through. the absence of total disaster is what our destiny is. we're not going to fix this long-term budget problem. think about it, it's real easy to finance a trillion dollar deficit at low interest rates. so why -- there's no pressure to really solve this problem so we're not going to do it. the last time i was on, i said the idea of a grand bargain is nonsense. but nonetheless, that doesn't mean we go into recession.
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we're still in a sustainable expansion. if your worry is long-term, it's hopeless. if you're worry is long-term, we ain't going into recession. >> we'll say good-bye to greg. steve liesman is going to sit uuuuuuñn??
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welcome back, everybody. it is back to square one with the debt threat. and many say that this fight could be even more intense as we start talking about this debt ceiling. senator johnny usington is a member of the finance committee. he joins us from atlanta. senator, thank you for being with us this morning. >> glad to be with you. happy new year. >> happy new year. we just made it through the fiscal cliff situation. i know this is a bill you voted for but you didn't like. why did you vote for it? >> i voted for it because it gave certainty to american business, small business, and families on what taxes would be. it made them permanent for everybody except those at $400,000 and $450,000 for a couple. it's good policy to make your tax policy permanent, so there's not uncertainty every year of what it's going to be the next year. that was the good part. the bad part, it was done behind
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closed doors when the issue should have been debated before the american people. that i am sure will happen on the debt ceiling. >> the president has said he will not negotiate on the debt ceiling. but we also have the sequester that's coming down the road. what do you think that these talks are going to start to look like? >> you have three cliffs coming in march, the sequester, the debt ceiling and the continuing resolution which i think ends sometimes towards the end of march. we've got three major decisions to make. all economic, all on fiscal policy. the president can fold his arms all he wants to and say he's not going to negotiate but, in fact, it's time he made permanent decisions on policy that begin to amortize and reduce our debt over time. make our spending on a cost/benefit analysis and stop the business of continuing resolution. >> senator, i know you were someone who has reached across the aisle to make sure you were working in a bipartisan way. when we've spoken with republicans recently, though, they have talked an awful lot about how they think that they're going to be getting
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spending cuts in these talks. when we've spoken with democrats they say they think they're going to be getting more revenue through closing loopholes or something else like that. it seems like an awfully big gap between the two sides. where is there some sort of common ground between the two? >> in the bill we just did we dealt with the revenue side. it's time we start dealing with the spending side. and we need to deal with the entitlement side as well. the big piece of this puzzle is get our arms around entitlement and the rapid growth of social security, medicare and medicaid. make sure that we preserve them for generations to come but in a way that they can be preserved, not in a way where they're going to go bankrupt. i think the real key, there are a lot of democrats who want to work on social security and medicare also. some say no, they won't do it. but most realize that's where the sweet spot is. that's where we can really fix a lot of our problems. >> but, senator, it's one thing to say those things. when you ask elected officials, they all tend to agree that yes we need to do something to strengthen medicare and make sure that social security is
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there for future generations. how they get there, very, very different plans. very different paths. i guess what i wonder is not what is your i deal and what would you do if you did change things all on your own without asking anyone else, what do you think is realistic, something both sides might actually be able to agree with that you think might help strengthen those programs? >> social security is the easy of the two, i can tell you that. in fact, in 1983 when i was 39, ronald reagan changed my eligibility for social security from age 65 to 66. we need to do the same type thing and that's recalibrate based on longevity and life cycle, et cetera. social security eligibility for my children and grandchildren should be further out to 68, and then later to 69, and possibly even by age 70, way down the line. c.o.l.a.s should be looked at, chain cpi makes a lot of difference in terms of the cost impact actuarially in terms of social security. there's no question medicare is the real difficult one.
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it's the 800 pound gorilla in the living room. paul ryan was on the right track in my judgment. i think premium support is something where you can control the government's cost. service reimbursement for medicare like we have today runs ramp pant and it's got to be fixed. >> senator, maybe there's a perception that, you know, the president got his revenues, now we got to work on spending. but just listening to some of his comments, are that if we are going to talk about spending, we're going to continue to make sure it's not on the backs of the people that need these things. it's going to be done in a balanced way. he's setting himself up for trying to get the rest of the revenue that he wanted. because $600 billion is not what he wanted. you know how much he wanted. what did he start out 1.8 or 1.6 and even -- >> 1.6. >> he's going to need at least 1.2. so he's going to be there to agree to any spending he's going to want another 600 billion, don't you think? or do you not think that he's going to, again, be insisting on higher revenue again before
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he'll agree on any spending cuts? >> no, i think the president wants more revenue, and i think he wants it the easy way in terms of taxation. but the right way to do it is to reform the tax code, to empower business and small business investments, so revenues go up -- >> but he's not going to roll over, there. he's not going to roll over. >> no, he's not going to roll over. but we're not going to roll over, either. >> really? >> no. >> oh -- >> it's going to be ugly, then. right? >> well, it was ugly on the fiscal cliff. it's going to be ugly again. >> eight weeks. we got eight weeks. we should relax for about eight weeks and then get ready to get uggdy again, right? >> i don't think you relax for eight weeks. i think you've got about two weeks to relax and we're going to start warming up for the main event >> for the main event. >> nor is this a situation, we've talked to several senators who think that this is going to be much uglier this time around. but will you hold it up on the debt ceiling or will it be something that you say, okay, we're going to deal with the sequester talks, because there
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are plenty of people who say that this past fiscal cliff was not the real issue. the real issue is the tell ceiling. and if we fail to pay the bills that we've already run up that that will change potentially borrowing costs for americans for years and years to come. and that is a concern. >> well, the big breakthrough needs to be first and foremost on the sequester. you know, sequester was put up as a poison pill last august so the super committee could find the $1.2 trillion in cuts. they took a pass and didn't do it, so sequester came in. now we're facing the music. we need to appropriate. we need to make those decisions not by automatic across-the-board cuts but by cost/benefit analysis and appropriations. the sequester is going to be the big battle. the debt ceiling is also huge and the president wants an automatic credit card. he's not going to get it from the congress. >> thank you, sir. >> thanks. arthur brooks is coming up right after the break. tdd#: 1-800-345-2550 when i'm trading, i'm totally focused.
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the countdown to the jobs report. we are talking to leading experts on what this crucial indicator means for investors and the economy. >> today's ghost host american enterprise institute president arthur brooks discussing employment growth and the nation's next fiscal battle. >> and changing the focus. tennessee senator lamar alexander on how washington can rise above and overcome the debt threat. second hour of "squawk box" starts right now. good morning and welcome to "squawk box" here on cnbc, i'm andrew ross sorkin along with joe kernen and becky quick. take a look at futures. ahead of the big jobs number which we will be getting in about an hour and a half, dow looks like it would open currently down about 9 points.
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nasdaq would be up marginally as would the s&p. but all of that likely to change as "squawk" rolls on. give you some of the numbers. let's get through some of the morning headlines. it is jobs friday. economists have become more optimistic as we approach the december employment report. the consensus dow jones forecast calling for 160,000 new nonfarm jobs up from myer forecast of 150,000. the unemployment rate seen coming in at 7.7%. congress also set to vote today, finally, on that 9.7 billion dollar relief funds for homes and business owners that were affected by floods from superstorm sandy. both the house and senate are expected to approve the measure. finally fiat continuing its move to eventually buy out all of chrysler. fiat had formerly notified a uaw health care fund that it will exercise an option to buy a 3.3% stake held by that fund for $198 million. currently fiat owns 58.5% of that u.s. automaker. >> fiscal cliff fight's over,
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the battle still looms large. our guest host today is arthur brooks, president of the american enterprise institute. author of the road to freedom, also of the battle. and arthur i want to start just quickly with you. okay, so your point, and we were talking about it, welcome, good to see you. out of the $26 billion, we got a $1 trillion deficit. this raises how much in revenue, $62 billion or something? >> about $62 billion a year. >> $620. your work is that 50 billion out of 62 billion goes to corporate cronies? >> yeah, the first two years $100 billion is going to corporate cronies. payoffs to corporate clients of the government effectively. and all kinds of crazy stuff. algae producers, rum producers. >> renewable crap. >> the wind guys that are a big deal. frankly what it means is that 80% of the new tax revenues are going right into the pocket of corporate cronies. >> so people that call redistribution, that's -- it sounds good to him that he's trying to help the -- he always calls them folks, rich folks got to pay a little bit more.
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>> the rich folks. the other rich folks. >> but the rich folks are actually paying to other rich folks. it's a redistribution from the 2% to the corporate? >> the corporate 1%. so basically the rich makers are redistributed to the rich takers. that's basically what obama-nomics is all about in a nutshell. that's how it works. >> and he talks about redistributing to poor people, working people -- >> balance. >> yeah, yeah, that's right. and he's going to come back in two months, this has only started. he said these guys want spending reform, entitlement reform. if you have any ambitions to save the country, what we're going to take of the quid pro quo is another bite out of the apple. >> just walk through the 80% number. >> yeah. >> you say 80% is going to corporations. >> more or less. >> so the whole conversation about the poor and the middle class getting anything out of this? >> yakkety yak is what it is. we've got $620 billion for ten years in new revenue. >> right. >> okay, there's about $100 billion are going to be going in new spending or continued spending for corporate payoffs --
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>> in the first two years? >> out of 62. >> renewable energy and the like. >> exactly right. renewable energy. anything made in american samoa, for example, gets this tax write-off, et cetera. and that's, you know, that's for attorneys -- >> why american samoa? >> it's a good question. again, the best guy to look at this is a guy named tim carney who writes for the "washington examiner" he's my colleague, and he does all the investigative reporting on this stuff. and he'll trace it all the way back to who knew who and somebody's friend and somebody's brother-in-law, et cetera, et cetera, you can find it all. but the bottom line is it's not right. it's not what we're actually trying to get the government to do. even if you're a liberal you think that somebody should be held, that the rich should pay something like whatever we call their fair share. nobody thinks that their fair should go into the pocket of another rich guy who simply has a better lobbyist. that's just not right. >> do you have that chart, greko?
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>> this is a call for corporate tax overhaul and just for tax overhaul in general, because if you can't find ways around these things, if you can't get a better tax deal by doing something with a better lobbyist, wouldn't be able to do that. >> here's the $62. >> okay. >> here's the $62 billion. there's our budget deficit. i don't know if that really -- that's probably not to scale. the one on the right needs to be a lot higher. but that -- and out of that 62 we were hoping that some of that would go, i guess, well -- intentions are always great. but, and that's not even going where it's intended. >> 80% of that is going to the kind of spending that's the biggest problem in the deficit to begin with. we haven't done anything. actually we've kicked the can down the road in a massive way and the whole idea is to get people like us to stop paying attention. stop being outraged and stop being as fearful as we are about the future of the country. >> we bring in john holtenwrath of "the wall street journal," greg from the economist also a cnbc contributor.
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did you draw that europe thing on the front, greg, today? what do you got boehner in? he looks like a little -- he looks like heidi. >> i like the beret on obama myself. you know, my only comment to my colleague is we were working on an editorial was, you know, saying that american policymakers are like the europeans now is increasingly looking like an insult to europeans. >> i know. you called them like, beirut yesterday, right? >> i was describing the markets sort of feel like beirut in 1982 with the fiscal equivalent of car bombs going off all the time. it's become so routine they manage to just basically soldier on and leave all that stuff in the background. >> rite. or the company that buffett bought in israel, where they, you know, every once in awhile got to run to a pawn shop and it's one of the greatest companies in the world. or whatever it is. what do you think? you've been listening to all this. >> yeah, you know, i'll take an optimistic tone on the fiscal cliff discussions. you know, in my view, they're
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making progress. and you know, these are not the kinds of decisions that are going to get made and resolved overnight, but, you know, they've addressed tax -- they've addressed income tax revenues. they've made some things permanent. they've taken some uncertainty out of the equation for the public. >> jon, now that they made them permanent where are we going to get the money >> they're going to force them to get made. >> with that 98%, or 99% since it's 450, that was what helped clinton get a balanced budget. it was at 99% of the people were kicking in some money. now that's permanent. >> -- advocate now because for months we had a debate about not raising taxes on anybody. >> no, i've been with hd dean for awhile if you actually want to do something from the deficit you can't get it from the top -- >> you've got to do it across the board. >> now they're gone for good. now they're permanent. so where are you going to get those clinton revenues that helped balance the budget now that you can't get it from the -- they'll never sunset the
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99%? >> well, as you say, now they've got to move on to the spending side and the entitlement side. but it's seems to me that there are triggers in place that are going to force these guys in washington to make decisions that they don't want to make. it's going to be ugly in the next few months. but if you look past march, you know, if they can avoid going through the debt limit, and everything they've done so far suggests that they're not going to go -- that they're not going to do that, they're going to have to make some big decisions. we could come out of this by the end of the first quarter having made progress on long-term deficit reduction. >> like a grand deal -- i thought the grand deal was so dead. >> no, no, no, but it's not a grand deal. it's happening -- >> individual fax reform is dead. why would if the president can't get another 600 billion over ten years in revenue, why would he cut any spending? why would he agree to a c.o.l.a. or means testing? he won't. >> well, you know, he might get a little bit of revenue. remember, we still haven't got
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tax reform yet. and i can imagine a scenario, where especially for example, in the finance or ways and means committee you could have some discussion about modest entitlement reform coupled with modest tax reform that gives both sides a little bit of what they want. >> you think that's possible? >> yeah. well, i don't know. what do you think the odds are that in two months, in exchange for something on spending reform, something to get any part of it under control, he's going to ask for getting rid of more deductions and exemptions and try to give tax reform from the bottom up to increase taxes on the top 2% even more? what do you think the odds of that? >> well, i regrettably i don't think you'll see the president actually stepping forward to say the 99% have to kick in some money. but there's a lot of democrats who do feel that way. people like peter orszag, jared bernstein, after they're free to speak their minds when they leave the administration, they say it's true. that it's regrettable that the president has walled off the middle class. so if the two sides can somehow
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tiptoe up to that line and go over it together, as with entitlement reform, yeah, we might see the middle class finally having to make a contribution toward the programs that after all do benefit the middle class. >> greg, is the issue, though, trying to increase taxes on them? or is the issue ultimately going to be to try to reduce entitlement spending, which some democrats and liberals would then argue would be hitting them in the same way? >> well, it's a good point. and that's one of the reasons to make the politics very difficult. unfortunately, both parties are kind of dug in on their respective sides of the issue. one of the regrettable things that's emerged about the discussions on the fiscal cliff was that at one point obama was willing to do something, for example, on cost of living, social security, and it was his side, harry reid, that shut him down on that. so we've known for some time that republicans have a problem with their base trying to compromise. i don't think people fully realize how much obama has a problem with his base. >> jon, are you also -- jon, are
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you also optimistic on the newspaper business and dvd rental chains and things like that? or less so? >> well, the "journal" is doing pretty well. >> you got good management. >> but i just -- i think this is a very messy process. we've seen that. but there are these triggers in place that force action, and that's exactly what needs -- what needs to happen. you know, i think there could be a lot of volatility caused by these discussions in the next couple of months. but, they have -- they have to come to some resolution. >> we just had a trigger -- >> we just had a trigger and all we needed, once again, there's a way to get around the trigger for two months. >> let me jump in here for a month -- >> -- on tax rates. >> what greg? >> jon had a great piece today which reflects my own thinking which is the fact that congress and the president keep inputting these triggers, and then they wrestle, they go to the brink, and then they finally pull off
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some sort of last-minute deal the markets are so now used to that that they just don't react to all the rhetoric and fear mongering about how we're going to have a disaster. so the volatility that we all think is going to happen over the next two months, i don't think there's going to be that much of it. because investors will be basically saying we've seen this movie before. and i think that actually heightens the risk. because the less pressure you get from the markets, the less politicians feel they need to act. >> but i'm not worried about the volatility, i'm worried about never seeing a stock market rally. never seeing 3% growth again. i'm not worried about a little volatility. when do we free up this economy to perform the way it's capable of performing when we just keep going with these stopgap measures every two months? >> well, we're actually going to find out, aren't we, in a few hours when we get the payroll report. i think one of the interesting things is actually how well the economy seems to be performing on a number of indicators going into december when this uncertainty was the highest. >> both you guys are the great fed watchers so you saw the minutes yesterday. you just talked about the economy. you think improving, i think. what did you make of the idea
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that maybe we're not going to be spending $85 billion every month? or will we be? >> i thought it was pretty interesting. you know the new york fed every fomc meeting they survey all the primary dealers and the last survey found on average they expected qe to stop in the first quarter of 2014. now if you go into the details much the minutes it shows that half of the fomc thinks it should stop in the middle of 2013. the other half didn't say. but you can guess that the median fomc members think they'll be done about a year from now. so, the market clearly was surprised that qe, at least from the fed's point of view, won't go as long as they thought. but there's an important caveat here very quickly the fed has a higher expectation for economic growth this year than the street. the fed thinks 2.5% to 3%. the street thinks somewhat less than that. the street is right and the fed is wrong. qe will continue longer. >> and, greg, it's worth pointing out that the fed has overestimated growth every year for almost the last ten years. >> since you and i started covering this. >> -- be disappointed. there's a good chance that the fed's going to be disappointed again. but you know, i think what the
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fed got yesterday was a bit of a warning shot. the market has become so attuned to, you know, all the qe that the fed has done, that you know, the mere whisper that they might not get as much of it as they expected, the market immediately sold off. i mean, that's got to send some shivers down the spines of fed officials who are starting, you know, have been worrying for a long time. what do they do when they have to pull all this back? >> look at gold today based on all that. it's amazing. all right. jon, thank you, good luck. good luck, the "journal" is a great -- i mean, without the editorial page i wouldn't know how to think, i don't think. that's the only place i read truth anywhere in print. and the economist, greg. i'm sorry. those are certainly good very accurate drawings on the cover. thanks. expert artwork. >> all right. up next, auto nation's ceo mike jackson with his company's latest vehicle sales figures and what it says about the state of the auto industry. and, later, we have senator lamar alexander. he wants entitlement reform, as
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welcome back, everybody. auto nation reporting its december 2012 sales numbers this morning. we have mike jackson, chairman and ceo of auto nation. he joins us right now with the results. mike, you've got some good news to talk about. >> becky, good morning. and happy new year to you.
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great to see you. yes, we retailed 28,000 new vehicles in the month of december, a 15% increase for the company, and it was also an excellent month for the industry, with retailing 15,400,000 vehicles. and i think it's a bellwether litmus test month. that the industry, despite the drama in washington, with the fiscal cliff, put up such strong numbers, says, the american consumer is moving on with their life. they now view washington, d.c. as a political soap opera, drama, that is somewhat contrived. but at the end of the day, there will be some sort of deal around these false deadlines, and they've just simply are moving on with their life. >> mike, that worries me to hear you say that. it worries me to hear you say that. it's great news that the economy is moving along and that's wonderful. but what we've just been talking
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about is the idea that we aren't going to deal with some of your longer-term problems, that the politicians don't think it's a problem, the market has stopped reacting like it used to. if the consumer no longer thinks it's a problem they won't put pressure on the politicians either. are we going to continue to just kick the can down the road on all these issues? >> so i'm not saying america doesn't care about its debt problem. but, if you think they're all sitting in front of the tv, watching every twist and turn on the fiscal cliff in this debt deadline come up, i'm here to tell you, as the voice of reality, that's not what they're doing. i will never forget this month, sitting in my office, watching the tv on the one hand tuned in on washington, d.c., and watching the traffic meter in my stores from phone calls, internet and leads and people walking in. there was never a hesitation in the entire month. the month started strong and stayed strong the entire month. now, i think one of the things that underpinning this is the stability that arised in the housing market.
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you know, people were, for years, uncertain where their value in their home was going. and now they feel that there's a foundation there, and there's a beginning of some sort of appreciation. and that gives them a certain confidence. and by the way, they've put their life on hold, starting in '08, '09, and' 10 and it's just part of the american spirit to move on. >> so if i put that all together -- >> is 15.4 million a real number, mike? because some people have suggested no, that people who are buying from hurricane sandy and other things, you've got to have a real good idea about whether you think that's sustainable, the rates? >> my forecast for this year, 2013, is mid 15 million units, so an increase of 900,000 to 1 million units over the 14,500,000 that was were sold in 2012. i fully agree that there is some sandy in november and december's numbers but still i'm
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forecasting mid 15 million and that's a combination of the bright spot that housing and housing will be over 1 million new housing starts this year. that's going to be very supportive of pickup trucks. energy is a bright spot. and the american consumer is not all-consumed with the drama in washington, d.c. an important drama, no question. and i agree. we need answers to these unsustainable deficits that we have. i'm just telling you where the american consumer is at. >> yeah. and so, if you had to gauge just how you're feeling about things and about the economy now given where we were let's say at any point since 2008, where would you gauge it? >> much more positive. i've always said that the automotive recovery was driven by genuine replacement need, exciting new products and recovery of finance in automotive. but i said the next legs to get back to 16 million plus, were we
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can't do it without housing. and we can't do it without stronger economic growth. so, i now see housing has stalized and a recovery is under way in housing that will last for years. and i think ultimately, the economy will have a stronger growth rate than the anemic 1.5% to 2% that we have now. and with that stronger employment, and the industry will, indeed, get back to 16 million units. >> mike, thank you very much. we really appreciate your time this morning. always great talking to you. and happy new year to you, too. >> happy new year. good seeing you. >> okay. coming up, walmart competitors not happy with the company's recent ads. we've got details after the break. and later today, don't miss this, a special first on cnbc interview, with james bullard, of the st. louis fed. that happens at 1:00 p.m. eastern time so please be sure to stay tuned as steve liesman's got that interview at 1:00.
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>> still to come, eyeing the debt ceiling. senator lamar alexander calling on congress to focus on entitlement reform. he speaks to us about the costly growth of government programs, and his plan to fix it. that interview is next, right here on "squawk box." this is $100,000. we asked total strangers to watch it for us. thank you so much. i appreciate it. i'll be right back. they didn't take a dime. how much in fees does your bank take to watch your money?
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welcome back, everybody. retail giant walmart is facing charges by competitors that a recent ad campaign is using inaccurate information. "the wall street journal" reports that rivals have complained to attorneys general in more than half a dozen states saying that the ads make misleading comparisons, or are promoting products that the company doesn't have in ample supply. walmart ads have targeted retailers including toys "r" us and best buy including several regional supermarket chains. the "journal" says best buy complained about a walmart ad while toys "r" us complained to michigan officials. >> you've got comments, questions, about anything you see on "squawk," shoot us an e-mail, you can also follow us on twitter @squawkcnbc is the handle. coming up next, senator lamar alexander on fixing our nation's debt crisis and what to do about the debt ceiling leading up to the number of the morning. the december jobs report. the number and instant reaction all coming up just ahead. [ count the number of buttons in your car.
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welcome back to "squawk box," everybody. here are our headlines this morning. we are an hour away from the
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december employment report. economists say that the u.s. economy added about 160,000 new nonfarm jobs with the unemployment rate expected to remain at 7.7%. we will, of course, have knows numbers and instant reaction as soon as they cross. also out this morning the institute for supply management's december nonmanufacturing index, which is out at 10:00 eastern time. that index measures the u.s. services economy. it is expected to show a slight drop from november, but still show service sector expansion. and semiconductor sales rose 2% in november, compared to a year earlier to a total of 25.2 billion. while that is not a huge move the semiconductor industry association said it was the first year over year increase registered in 2012 as the industry navigated difficult conditions. >> our next guest is focused on entitlement reform. joining us now from washington, senator lamar alexander of tennessee. should note that he voted yes to the recent so-called fiscal cliff bill but he is calling for entitlement reform in this next round. of negotiations.
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and why don't we put some details on the board, senator. what exactly would you like to do with entitlement reform? and if you can, be specific. >> i will be very specific. let me tell you why. i want to do that. and put it on human terms. we've got millions of americans who are waiting, counting the days literally, until they're eligible for medicare to pay their medical bills. and the trustees say medicare won't have the money to do that in just 11 years. so we need to take a trillion dollars, of the growth in medicare spending and reduce that. and senator corker and i have suggested that first you restructure medicare. this would save about $700 billion -- >> when you say restructure medicare, what do you mean? >> i mean by that. i was about to tell you. we restructure medicare so that it can compete with a reformed medicare advantage. that would leave seniors the opportunity to continue to choose medicare. you should increase the medicare age by a couple of years. warren buffett and i could stand that. and people with lower incomes
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will be eligible for obama care. we could increase premiums for those with higher incomes. on medicaid we can give states a waiver, that would save about $50 billion. and on social security, we could also make sure that over the next 50 years it's solvent. by using a consumer price index that's more realistic. all those steps would save about $937 billion. which we suggest congress do at the same time we increase the debt ceiling about a trillion dollars, which is what the president has asked. >> how would the means testing program work? meaning, what would be the different marginal rates? >> well, it would -- it would depend. i mean, it could be -- it would just mean that someone with higher income would pay a higher medicare premium than someone with lower incomes. it would mean that someone with higher incomes would have less of a medicare benefit than someone with lower income. it could be set at any level. now, what we've done, senator corker and i, and what alice
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rivlin and senator domenici did, and what paul ryan and senator widen did is put out a specific plan for this to deal with the medicare fiscal cliff. this is what the president needs to do for the next two months. this will not happen without presidential leadership and he needs to be as good going across the country persuading us that we don't want to push seniors off the medicare fiscal cliff as he has that we want to raise taxes on the rich. >> do you have any hope over the next two months that you will actually get there on this issue? >> sure, i do. i mean 9 president's beginning his second term. he knows exactly what needs to be done. we've got 40% of the budget restrained to a growth of about the rate of inflation. that's what we call discretionary spending. the mandatory spending, which is going up at the rate of 3 to 4 times inflation is led by medicare. so the president's very skillful. he knowles what to do. he's been told by his debt commission he has several options. he has a lot of us in the senate in a bipartisan way who are
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willing to work with him on this. this is his job to do. great crises aren't solved except by presidential leadership and we need to see more of that on this plan. >> how much of this is going to get wrapped up in the debt ceiling debate? >> i hope a lot. >> which he has said he won't negotiate on and is clearly trying to separate these issues? >> i think instead of saying what we won't do for the next two months let's have a president and those of us on capitol hill say what we will do and what we ought to do is work together to do what everybody knows needs to be done. this is what nobody wants to talk about. nobody wants to talk about. the president has not made a proposal on this. he keeps talking about a number but he's never done what senator corker and i have done, which is say, here's exactly what we need to do. he needs to provide that leadership. if he does, it will happen. >> senator, this is arthur brooks. i got a quick question for you about what i think is probably the easiest, most commonsense of reforms that you just talked about, which is matching the retirement age for medicare up with the retirement age for social security, which is moving up from 65 to 67 and i know that you're in favor of that, and so
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is virtually everybody who is looking at this. but the president has seemed kind of hostile to that and has basically said that any kind of reform, even the simplest reforms, are going to have to have a tax side quid pro quo. in other words the rich are going to have to pay even more. how much are the republicans in the that going to be favorable to the idea of having even more tax increases on the top echelons in exchange for some of these commonsense reforms that you're talking about? >> well, we're not interested in new taxes. i mean the president won the election. he got his tax increase on rich people. i mean, you could -- you could increase taxes on the wealthy and cut their heads off and not make a dent in the problem we have with spending and entitlements. so what we're willing to do is for those who are wealthier to have higher debt -- less benefits and pay more for the benefits they receive. but, i'm not. and i have yet to meet a republican, after this last week, who's willing to raise taxes more. but, again, let's focus, and
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arthur you're pretty good on pointing this out, the victims here are not some numbers somewhere. these are millions of americans who are going to be pushed right off the medicare fiscal cliff in 11 years, which is when the medicare trustees say that program won't have enough money to pay all its bills. we are not doing our job if we don't help those seniors now. >> hey, senator, you know that what -- what i hear as opposition to anything like this, is that once you make medicare seem like a -- something that benefits lower-income people, rather than across the board, then that's when the liberals start to worry that you're trying to somehow take away that social contract. they don't want to do anything that, or even social security. i've seen really wealthy people in here say that, you know, they paid into it, they want to get it out. the minute you make it where it seems like welfare, then its days are numbered. why do you think the president is going to bargain with you on what his liberal base definitely
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doesn't want to do? >> well, the president's job is to lead the country. i mean he's not a senator anymore. his job is to go across and say, i mean this isn't as easy as persuading you to raise taxes on your neighbor with a bigger house. this is tough work. and the president has to lead it. as far as social contract, the contract is that the program will be there to pay your medical bills and to help you afford older age when you get to that age. all through its history you've always gotten more back from social security and more back from medicare that you paid in. the problem is, we're borrowing 42 cents out of every dollar here and the government's going to go broke. and it's going to be led by the medicare trust fund, which its trustees have said will go broke in 11 years. so this is not about some abstract notion. this is about whether you're going to be able to have money to pay your medical bill in 11 years when you get to be 65 or 66 years old. >> so the whole debt ceiling debate should be about medicare reform. that's what you think republicans should focus on? >> it should be about entitlements and here's why.
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we already have -- we've taken the 40% of the budget that we call discretionary spending. that's national defense and national parks. and its under -- it's going up the rate of inflation. the other part, led by medicare, is going up at 3 or 4 times the rate of inflation. that's the problem. and that's the problem that presidential leadership has to focus on, and if he does, we're ready to help him do that. >> senator, we spoke -- we were actually in washington in the weeks leading up to the fiscal cliff. we spoke with several senators who told us that if you wanted to look at the fiscal cliff talks as any sort of a success you would have to see a grand bargain, something that was $4 trillion that we went off the deficit with. we didn't get that sort of a grand bargain. a lot of people say that is not anywhere near what we're going to get. how shall we be measuring success in this next round of talks? >> i would measure success by looking at whether the congress has the courage and the president shows the leadership to look at the problem that everyone knows has to be dealt with but don't want to talk
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about, and that's entitlement led by medicare. i would not look at the first ten years, because it's harder in the first ten years of retomorrow to get the kind of savings you want. i'd look at the second, third and fourth ten years to make sure struck sureally the program was sound enough to help older americans afford their medical bills. that would be the test. and if you do that, that adds up to about $4 trillion along with all the other things we've done with the budget control act. >> senator, we're going to leave it there. we thank you for your perspective this morning and we'll see how this all plays out, and we get to talk to you as it does. >> thank you. >> eli lilly looks like it's going to open slightly higher today after it had some comments about its guidance, and sees full-year 2012 earnings per share at 3.30 to 3.40. that's more or less where the street is at 3.36. but for 2013 it's at 3.75 to 3.90 and the current consensus is just 3.71. that's better than expected for fiscal '13. >> when we come back the case for free markets.
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arthur brooks tells us why the capital system ensures fairness and opportunity despite some critics who want to peg free markets as rigged and unfair. we're counting down to the government's jobs report. get the market information you need from the names you trust. right here on "squawk box."
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welcome back to "squawk box" this morning. take a look at futures ahead of the big december jobs report. we're going to be getting that in about 45 minutes from now. the s.e.c., and this is another big story, deciding not to take action against former berkshire executive david sokol. in 2011 you'll remember sokol violated the company's trading rules in a $3 million windfall profit after he invested in chemicalsmaker, those shares rose nearly 30% after berkshire announced it was buying the company. sokol then resigned from berkshire. you may recall this, sokol appeared on "squawk box" shortly after the riis egg nation, however, and had this to say about his investment. >> i don't believe i did anything wrong. i was making an investment that i believe in. i frankly, if i believe in something -- if i don't believe in it i wouldn't recommend it.
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>> and we've been talking about this story all morning. a lot of people wondering what was ultimately going to happen. some people thought the s.e.c. would ultimately bring charges. berkshire did bring -- berkshire did publish a report that went into all of the details, laid out what they said -- i don't want to say it was malfeasance but they suggested that there was a problem and that it at minimum broke the spirit and rules of their own by laws. >> and the certain was that there was some -- there was an admission, they said early on, that sokol owned a stake in this and they knew that. there was an assumption it was a much longer term. a holding he had for a much longer time. not something he purchased in the months that were leading up to him suggesting that berkshire actually buy this company. that's where it violated berkshire's law. >> so the question was whether he misrepresented these issues to warren buffett and others, whether it was intimated. as we've said throughout his lawyer has said that he's been -- this is david sokol's lawyer, says he's been
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vindicated. the other question is, is it vindication or does the s.e.c. feel like they did not have enough evidence to bring a strong case? that's a very crucial question that just about all of these financial cases these days. >> also, another big story in the news is what's been happening with relief for sandy. there's a $9.7 billion measure to pay flood claims that is set for a vote in congress today. it boosts the prospects of relief for many of the home and business owners that were flooded out by superstorm sandy. if the house, as expected, actually approves the flood insurance proposal the senate plans to follow with a likely uncontested vote later in the day. lawmakers in new jersey and new york say the money is urgently needed for storm victims awaiting claim checks from that late october storm. something like 67, 68 days that have gone by. the storm was one of the worst-ever to strike the northeast. fema is worrying that the national flood insurance program will run out of money next week if congress doesn't provide additional borrowing authority to pay out those claims. the flood insurance measure is the first phase of a proposed sandy aid package.
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under boehner's new schedule the house will vote on january 15th on an additional $51 billion in recovery money. the holdup here has been back and forth between the senate and the house. the senate passed a bill of $60 billion that many republicans say look, it's loaded up with all kinds of pork, other measures that won't look at it. we've been looking at documents here showing some of the additional write-ins, for isaac and areas in the gulf coast and for fisheries as far away as alaska. so there have been a lot of questions about that money. but at the same time it also shows a really dysfunctional congress because we are talking about more than two months later the victims have been sitting here waiting for any sort of aid to get out of this. the house didn't come up with their own proposal earlier that they could have passed and if you look back at something that happened with katrina i think it was two weeks later that they were given aid. >> that's exactly right. so whose fault was it, the house? >> it's, as becky just said, it's the dysfunctional government system that effectively is holding victims of a big disaster as pawns. what they're supposed to do is pay for public debts.
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what they want to do is pick political winners, old-fashioned pork, social engineering and they try to roll that into every kind of public spending bill that's supposed to be for public good. that's why it takes a really long time and you try to do something like hurricane sandy turns out to be $60 billion of which $17 billion of it is for left wing community activists? i mean you can't make this stuff up. >> let's talk, i thought lamar alexander was, i mean, focused and did a great session. he's a guy that democrats point to as a senator that they can work with. so, when we talk about spending, even social security, we can figure that out with c.o.l.a., right? >> right. >> so you -- >> c.o.l.a. and a few other things. >> we can figure that out. and discretionary lamar alexander pointed out we're almost there for discretionary. so it's all about medicare. so what republicans are -- is that the right tack to try to use the debt ceiling to get medicare under control? and is there any way that president obama goes for that type of plan that -- or the any
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type of going to define contribution from defined benefit? >> well, it's pretty clear that obama believes that the only problem that we have is an undertaxing problem in this country. >> for medicare, as well? >> everything. everything. there's no -- there's no indication that he honestly believes that we have a spending and entitlement problem in this country that can't be taken care of from the fiscal consolidation that comes around from taxing people. >> what do you think people want, arthur? a lot of people want medicare. they don't want it at 67. >> of course, that's absolutely right. >> so do we give the people what they want? >> no. one of the cases is we have to make the moral case to the american people that what we're doing right now is going to wreck the country. and until right now we have a president of the united states who is basically saying you know, the reform, the real problem is that the fair share is not going to be paid by the rich. as long as the american people keep hearing this, i mean we know it's not true. we believe it's not true. we've got the data that show it's not true. but as long as there are major politicians up to and including the president of the united
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states, that are continuing to tell the american public they don't have to make any sacrifices, we're going to continue down this road. we know where it leads. this is exactly the kind of entitlement state that is ruining the economies in europe. this is the reason there's no economic future for spain, and greece, and portugal and ireland, probably even for italy and france. it's exactly what we're talking about here. it's unsustainable. yet that's exactly what we're doing right now. >> how is this going to play out over the next few months, then? the republicans are not going to raise -- he said we'll go up a trillion as long as you take a trillion out of medicare. is there any way that that deal is -- and that turns into the $4 trillion grand deal if you are able to do it over ten years. >> the only possibility is going to be in some sort of haggling between the two sides, about more tax increases, probably through cut deductions, so that the people at the top pay even more for the most minimal decreases in entitlement spending. probably having to do with the age of retirement and link them up between social security and medicare. it's not going to be enough.
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i'm very pessimistic about over the next two months getting meaningful progress. >> so you heard lamar -- there's no way that all the things that lamar alexander wants to do, that that doesn't get done? >> what i'm very optimistic about is that lamar alexander is a real leader in the senate is asking about the right things and wants the right things. that means that the senate republicans are focused. two years from now, four years from now, is a nontrivial chance that the republicans could be in charge of the senate, if that's what their focus is we can start getting real reform. >> so it won't happen in four years, it's not going to happen in this year? >> it would shock me if it happened this year. >> the thing that lamar alexander said that kind of stuck with me is he said don't look at any savings you're going to get in the first decade. he looks out second, third, fourth dpek aid. so you're talking about very long-term fixes and the house republicans have always pushed back on that and said forget it. we don't believe anything that doesn't start right now because you always change the rules on the. but he's saying look you've got to act now if you don't want this change to be too severe. >> that's what they always say. and the thing that we should all be worried about is, of course,
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there's literally nobody in the house and senate who's going to be around four decades from now. actually that's not true. some of these guys are in for like 562 terms. it would be good if nobody was around 40 years from now still representing the districts. the main point that you'll always hear, a pushback on this, is that they're talking way, way beyond their terms and way beyond the scope of their own lives. so the result is they're simply pushing the pain off to future generations. >> i disagree with that. i think some of these entitlement reforms have to be dealt that way. that's the way simpson-bowles set things up for like 40 years from foul for the retirement age and social security to go up for about a year or two. and that's fine because you give people their entire working lives to plan and know that you're not going to be able to retire until you're 70 and get federal assistance. if you want to retire earlier save it yourself. i think it's okay to set the rules of the game and say this is the way you have to operate for your entire working life. >> what they always do is never really bake it into the cake. what they say is our plan is 40 years from now to have people working until they're 106.
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well, that's not likely to be the case, because we'll simply take an easier path when it -- >> but senator johnny isakson laid out how ronald reagan did this. he said when he was 39 the rules changed and he couldn't retire until he's 66. i do think if you want to do this gamely you have to push off some of these dates -- >> that's 25 years. so the question is what's the -- >> what's the right range? >> ten years, 20 years, 30 years? >> it's easier to do it for these long-term plans of entitlements than with anything else. >> right. >> you can actually do something with entitlements that look kind of permanent but still, nothing's really permanent sflp >> i don't see why people have to retire anyway? if you can't afford to retire, don't retire. people working and pay your way. >> or if you love your job. >> one extra year we got to wait 40 years. oh, gee -- >> look, people my age, i mean i don't expect social security. >> i'm going to be andy rooney. i'm going to 82. >> we're going to look great on air together. >> yeah, we are. >> no more hi def television,
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please. >> we are still waiting for the jobs report. we're less than 40 minutes away from the september jobs number. we'll bring you the markets and the reaction. plus much more from arthur brooks. "squawk box" is back after a very quick break.
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that's right. we're almost there. the final countdown to the data point of the month. it is the december jobs report. it is coming up in the next hour on "squawk."
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it's jobs friday. >> settle in. because you are here for the long haul. >> you've heard the gloom and doom predictions. fiscal cliff uncertainty will keep american employers from hiring. but do the fears come true? >> i see what you're doing. >> you're through. >> we're going to talk expectations with a team of investors, economists, and those that cover the markets. >> so, let the countdown begin. ♪ it's the final countdown >> the december jobs report is now just about 30 minutes away as the final hour of "squawk box" begins right now. >> welcome back to "squawk box" here on cnbc, first in business worldwide. i'm andrew ross sorkin along with joe kernen and becky quick. our top story this hour the jobs report. forecasters say the economy likely added 160,000 jobs last
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month. the unemployment rate is seen holding steady at 7.7%. in about a half hour we'll find out the true answer, few economists revised their positions higher following yesterday's stronger than expected adp report. forecasters at goldman sachs now expecting 200,000 jobs created. credit suisse is calling for an increase of 185,000 nonfarm payrolls. we have a great panel. in san diego senior economics reporter steve liesman. former chief economist to vice president biden, jared bernstein joins us from d.c. in studio, nuveen investments chief equity strategist bob doll and cnbc's kelly evans from across the pond. and of course our guest host arthur brooks. we've got much to discuss with what we're calling "squawk's" fab five. first the markets ahead of the report. joe? >> equity futures are in hold mode until we see what happens. down about six points or so.
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yesterday, wasn't that exciting. we had a couple of exciting days that got us back to 13.3 or so or 13.4. now we're no longer cliffing, now we're worried about ceilings i think at this point. overseas, and the end. >> what do you do for a rise above a ceiling? >> 3%. >> what do you do if you rise above first ceiling you hit your head? >> we have said we might want to change the slogan. you don't want to rise above a ceiling. you can hurt yourself. i think seeing the deal that was done, if you think that we've risen above and we don't need to keep urging these people to work together -- >> you'reite on that. >> this campaign could go on forever. >> come together. >> come together. >> but we're not allowed -- >> starbucks already has that. >> oh, yeah. >> right, right. and there is not a whole lot. it looks like -- the entire world is being held hostage by our employment numbers here. which it should be as we are the
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dog and they're all just little tails wagging around. >> are you suggesting that this jobs report does matter? >> i'm saying it does matter, just doesn't matter to me as much as it used to. anyway, the european market. >> we have less than 28 minutes to go. let's get to steve liesman, who really takes a look at what's been happening. what in the heck are you doing out in california? >> i am at the american economics association annual meeting. all the what do you want to say the wonks, the nerds, the guys who study just about everything, come together here, really thousands of economists every year come and they pick the most efficient or cheapest weekend of the year, which is the weekend right after new year's. and let me give you some what's going on with the jobs report. as you said, nonfarm payrolls up 160,000. that's a bump from the 150,000 we had the day before. that's because of the rise in the adp number you see right there at 215. unemployment rate 7.7%. and average hourly earnings up
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0.2%. not very much change right there. now, some of the reasons for job optimism are the adp report. the jobless claims, 260,000. that is the best number we've had. the four week average, since 2008. conference board help wanted up 4.6% and also the ism manufacturing employment numbers, has been doing pretty well. you also may get some sandy hiring, hurricane sandy hiring on the other side of this. so those are some of the reasons for optimism on the other side the nfid numbers, the small business numbers have not been good. they weren't good inside adp and they weren't good for the nfib report. so those are reasons for pessimism. right now i think the street is looking for 160, and maybe a little bit more given the adp numb number. >> how about you, steve, what are you looking for? >> i think 160, 170 seems about right. we did 146 last time around.
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i don't expect the government to be losing too many jobs this time around. i'm looking for that to kind of add, we've had a huge decline in state and local employment. i'm hoping that that's sort of come to an end here. what i'm a little bit confused about is manufacturing. because the ism manufacturing numbers look like they were pretty good. but inside adp, they were negative. so i'm confused. the other thing i'm confused about is you had this kind of lackluster capital spending. capital spending and jobs usually go together pretty well. it's interesting that you've had, i think, the fiscal cliff effect was to reduce capital spending. but, you didn't see a reduction in hiring as a result of the fiscal cliff. >> okay. let's bring in the rest of our fab five as well. steve you stay there, too. kelly evans is here with us on set. when steve said he was out, and you said i can't wait to go. >> i'll be there tonight. the annual meeting, we jokingly were calling it nerd super bowl. but it is the one place where you always want to watch these meetings and sort of where people's attention on or what it's focused on.
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it will tell you like ngdp forecasting or what's about to be coming up to the policy foreground. i am excited. >> what are you looking at with all these numbers? people say with sandy and everything, it's going to be hard to figure out what's real and what's not. >> true. although the labor department did say there was no sandy effect. won't necessarily be as much to look for this time around. i think the real question is just how much did the sentiment shock translate into actual job destruction or lack of job creation or whatever. if you go back to august 2011. that's when we saw the philly fed drop to minus 30, we saw the debt ceiling negotiation. but the actual damage to the economy was pretty limited. the so question is are we going to see the same kind of thing where despite the drop in consumer confidence we've actually seen a drop in capital spending by businesses and the question is now, as steve was sort of saying, will we see the same kind of impact hiring? >> that's been an interesting thing we've been following yesterday. mark zandi was giving us the adp numbers saying this proves there
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wasn't a fiscal cliff impact in terms of jobs. what should we read into any of these things? a number above, say, 175? >> i think that would be probably the right conclusion. i mean, i didn't really encounter a lot of employers, or folks reflecting on the fiscal cliff in terms of their immediate hiring or a lot of worries about if we went over and stayed over the cliff, of course, in the contracting community, but elsewhere, as well, that that would definitely depress hiring in future months. i think that most of the risks in today's report are to the upside. i'm also, i'm at 170, and my model is bumped up a little by adp's like everybody else. the one factor that hasn't been noted yet, which i think also gives a little bit of a bump to the upside is the 3.1% of gdp in the third quarter. that's, you know, a point above trend. that's typically feeds back into the jobs numbers with a lag of a few months. so you never know month to month with the volatility.
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but i do think the upside to the 160 are more pronounced than the downside. >> bob the question that this all begs is what does it mean for the market. if we get a 160, 170, even 200 plus, is there anything left in the markets after what we've seen right after the first few trading days? >> i think there is. the underlining tone of the economy is supported by hopefully a good number. a little better, not great but it's a little better. i think what we need to watch as much as anything is the participation. you think about last year, we added about 1.6 million jobs. but economists tell us, you need 1.5 million just to keep up with workforce growth. so the decline in the unemployment rate was all about people giving up looking for a job. >> you see the participation rate increase, and the unemployment rate tick up as a result. is that good news to you? >> that's just fine because that has to do with confidence and confidence is what we need. >> jared what are you going to write for the huffington post net? are you going to say, are you now that you got the tax increase, are you going to shift
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to trying to get some spending cuts? are you going to try to get another 600 billion to get up to 1.2. where are people -- where are people like you going to focus their efforts right now with the debt ceiling coming up in two months? >> probably more of the latter. >> i forget what i said already. what's the latter? >> i forgot what you said also. >> you'd like to, i know. >> just admit it you want another 600 billion. you don't give a crap about spending. >> i admit it. 12k3w4r600 billion to -- >> you're actually, that's the exact -- that's the exact number that you've hit on. according to the -- >> i can read your mind. >> i know. that's scary. >> according to the numbers that we've crunched, in order to build on the 1 trillion in spending cuts we've had thus far, nobody seems to like to remember that, but, in fact, we've cut spending a trillion so far, we just raised taxes by 600 billion. these are all ten-year numbers. if you kind of crunch all the numbers, put it all together, you need another 1.2 trillion
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over the next ten years to balance the debt relative to gdp. basically to get the debt-to-gdp ratio to stop rising. which has got to be everybody's first goal. i suspect everybody listening would agree that the first goal -- >> you could do it with more cuts, too. >> so you need 1.2 trillion to stabilize the debt-to-gdp ratio and i think it should be split evenly between tax increases and cuts, so that's 600 billion on each side. >> there are the republicans that we've been talking to. >> they forgot about that trillion. >> they start with a different baseline. they look at the numbers and say, look, we just gave big tax cuts for just about everybody in the united states and we want to see cutting on the other side of that. >> yeah, so anyway, first of all, it's not so much a baseline issue. i think everybody agrees who crunched the numbers, we need about 1.2 trillion to stabilize the debt-to-gdp. the argument is do you get there through more cuts or tax kre
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increases? right now we've got a trillion dollars of cuts, 600 billion of tax increases. if you just split the difference there you'll have a ratio of about two-to-one, spending cuts to tax increases. >> anyone who said the president got what he wanted in terms of higher taxes on the rich, now it's time to talk about spending they're in for a rude awakening. it's not going to be that way is it? >> it's not a rude awakening. the president has been very explicit about this. >> did you lamar alexander earlier on the program? >> yes. i thought he was excellent. >> would you get behind his plan when it comes to means testing medicare, social security, chain cpi, et cetera? >> two things first of all, mostly, and second of all -- >> mostly? >> but let me say what i mean. first of all, people say republicans don't have any ideas and they don't come out with any specifics. >> who said that, you? >> not me. listen for a second. listen for a second. >> everybody says. >> everybody says -- if you listen to lamar alexander, he disproved that. he actually has an agenda.
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now here's the thing that i would add. here's the thing. you have to -- you have to realize that 70% of the income of the typical social security beneficiary comes from social security. their immediate income is $23,000. you have to be very careful not to ding them in all the stuff we're saying. so i agree with means testing. i think there's room for the cpi and all that stuff. but it has to be targeted at upper income beneficiaries. and i don't think albert or other people would disagree with me on that. >> david brooks, do you agree with that? >> arthur. >> what did i call you, david? >> david -- >> i called you albert. he called you david. >> well, i mean, it seems to me what we're talking about here is look we just accommodated ourselves to 620 billion in tax increases to the rich so what we have to get ready for next is more tax increases on the rich. isn't that what we just heard? >> and spending cuts. both. >> really? so in other words there's going to be a quid pro quo from the white house to cut spending, to do what we all know we really
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need to do, especially in entitlements and that quid pro quo is going to be to raise taxes yet again? >> arthur, listen two things. two things, first of all, the white house has already offered 400 billion dollars of spending cuts in the entitlements and republicans said no. secondly, the white house actually implemented 700 billion dollars of medicare cuts, and mitt romney and paul ryan said they were going to put those cuts back in. so don't tell me that the white house or democrats are not on board here. so you know, those plans have been on the table. you're hearing me, i think you're expecting me to come out here and say lamar alexander is crazy. >> jared i knew from talking to you earlier in the week that you were on board with some of these things, even the potential for chain cpi, but then we read these write-ups and the tic tocs on everything that was happening up to that point and the idea that reid took this proposal from the white house, and threw it into the fireplace, burned it, makes us think that okay,
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wait a second, there are two wings of each of these parties have a wing that they can't control. >> you have to be much more nuanced about it. you have to convince the harry reids of the world that we're going to protect -- >> he's the senate majority leader. >> i don't care who he is. you have to convince him that we are going to protect vulnerable beneficiaries, and there is a way to reform entitlements and protect vulnerable beneficiaries, which are a lot of people at the same time. i hope arthur and others who want to do with this, would get on board of this enstead of this broad cut the heck out of entitlements. >> arthur what do you think about that idea? we did have a long conversation the other day, tony fratto and jared bernstein both agreed that you could do chain cpi if you put something in to protect the poorest of the people who are -- >> for sure, look. that's the purpose of the program. i mean, there's a social insurance programs and medicare is important and social security is important and we don't want to cut the heck out of them just to save the money. we have the programs for a particular reason. but there are ways that we can make reforms. i'm sure jared completely agrees
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there are good ways to make cuts that are reasonable, that do protect the most vulnerable beneficiaries. the question i have is it's going to be in exchange for nor tax increases what are those tax increases? what are the ones that we still haven't done? >> the tax expenditure side. you have to start going to the loopholes. that's something that republicans themselves have emphasized, maybe arthur you guys have, as well. >> but the republicans say do that when you bring down tax rates to 28% or some different number like that, too. >> you might be able to get that on the corporate side. there might be a broader base, lower the rate on the corporate side. but i think at this point you have to add revenue. you can't go revenue neutral which is what you're talking about becky. >> why don't we stay right here, we've got a lot more to talk about. we're going to get back to more of our final predictions for the instant reaction to the jobs report. the panel unfortunately is staying with us until we get that. stick around. >> we are counting down, to 8:30 eastern and the december employment report. you're looking at a live shot right now of the official labor department clock. before we get to the jobs
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numbers, a few other headlines including why the s.e.c. is not taking action against david sokol and why the vatican is saying, cash only, please. those stories and more when "squawk" returns. monday on "squawk box," it's debt ceiling deja vu. >> this is a great country, and yet we can't get our act together to avoid a short-term default let alone deal with the real crisis we have of a long-term deficit. >> congress again facing a fiscal deadline. we'll ask former new york governor george pataki if lawmakers can rise above partisan politics. plus, the future of banking. with the former chairman and ceo of wells fargo. "squawk" starts monday at 6:00 a.m. male announcer ] this is joe woods' first day of work. and his new boss told him two things -- cook what you love, and save your money. joe doesn't know it yet, but he'll work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. he'll start investing early, he'll find some good people to help guide him,
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all right, welcome back to "squawk box," everybody. we are waiting for this big number that is now just 11 1/2 minutes away. markets are kind of waiting on tenterhooks. you can see there has not been a lot of movement ahead of it. people are waiting to see what happens with the jobs report at 8:30. also in our headlines this morning, get this, it is cash only at the vatican. bank of italy pulled its authorization to accept credit cards and other electronic payments from visitors starting december 31st.
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italian news reports say that the itallian central bank took the action because deutsche bank in italy has not yet fully complied with the european's stringent safeguards against money laundering. deutsche bank has handled electronic transactions for the vatican for years. now it's cash only. load up before you go. >> means i can't pay my tithe by check anymore. >> check will work. >> only cash in the basket. >> catholics don't tithe. >> they're supposed to. >> catholics? >> they're supposed to. >> you're a good, practicing catholic. >> boy, i've lapsed. i can't -- yeah. long lapse. headlines. former berkshire hathaway ceo david sokol won't face any ens forcement action from the s.e.c. according to his lawyer. he resigned in 2011 amid questions about his stock purchases. he joined us on the "squawk" set. it was a pretty interesting interview. this is not the most interesting sound bite. but here's one of them. something he said that day.
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>> the reality is, i have no control over a deal ever happening. and so to -- i mean, the alternative would be for me to only invest my family assets and if i think there's a good deal for berkshire, not give it to them. >> that was a better one. >> but there was -- there are a lot of, i can remember asking him, just let me just read to you what you actually did. and then you tell me that you can't figure out that this stinks. that this smells really bad. that you had no idea that if you bought this, and then you advised the company that you work for to buy the company outright and you make, you know, in a month you make 30%. you can't see how that doesn't look right? and that's where the answer goes. we don't know why the s.e.c. didn't -- >> it was interesting because he said, look, the only thing i can do is not bring a deal to berkshire. the flip side of it might be the only thing you can do is bring the deal to berkshire and not invest your family money. >> it would have been so easy once he saw that maybe they were
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going to do something he could have sold his entire stake and said i recuse myself. once i went and asked warren to look at the whole company, i could have sold the entire stake. anyway it paid off for him. i forget how many -- >> it was not -- >> he did say in that interview, eventually, when we ask them several times, don't you wish in hindsight wish you had done anything differently? he said yeah, in hindsight i wish i had. >> it's $3 million or $4 million profit. >> but trust me that was not -- >> a guy like you it's not a lot but to some people that would be a lot of money to make on one trade. three or four million dollars? not to bob doll. >> a lot of people who would not give their career and their reputation -- >> right. >> no way. >> just worth noting the s.e.c. so far has declined to comment about what they're doing about this. so so far what we're hearing is from his lawyer. >> right. >> which is traditional, by the way. the s.e.c. doesn't -- the s.e.c. very rarely -- occasionally they do. and so --
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>> in the letter of the law, you would think the spirit of the law would preclude you from -- but whether there's a statute that you could enforce, actually get a conviction -- >> right. >> i think there's a statute. i think there's the flip side of whether you think there's a judge or a jury that would actually -- >> right. >> play along. >> all right. well you would know. because the elder sorkin knows this kind of stuff, right? >> he's a litigator. >> great late gator. right? >> breathes that into you in a lot of ways. >> you think this is like a litigation? >> a lot of times i feel it. >> coming up -- as do many of our goetzs. the jobs report getting closer. final predictions from our panel up next as we head to break, check out the ten-year note. [ male announcer ] you're not the type of person who sets goals
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welcome back to "squawk box" everyone. that december jobs report is just a few minutes away. let's look at a few of the stocks on the move in today ease trading. eli lilly is projecting fiscal 2013 earnings of $3.75 to $3.90 a share. that's above street estimates of $3.71. lilly says it's been successful in advancing its pipeline. also athletic apparel retailer finish line reported a break-even third quarter that was well below expectations for a 10 cents per share profit.
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it was challenge iing also lulu lemon has been downgraded to neutral from outperform at credit suisse. lulu lemon's products and their brand extensions have not been met with strong consumer response suggesting slower growth sales. in other words consumers don't like the new stuff it's been putting out just yet. when we come back, just a few minutes away from the december jobs report. as we head to a break right now, take a look at u.s. equity futures. right now, just three minutes 23 seconds away. we'll be right back. number of s in your car. now count the number of buttons on your tablet. isn't it time the automobile advanced? introducing cue in the all-new cadillac xts. the simplicity of a tablet has come to your car. ♪
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welcome back, v. we are just seconds away from the december jobs report. ahead of those numbers we've been watching the futures and the markets are watching just as closely as we are. dow futures down by four points. s&p futures up fractionally. our panel is here and they are ready to react. in san diego we have steve liesman, jared bernstein is in d.c. today. in studio with us we have nuveen asset management's chief equity strategist bob doll. cnbc's kelly evans and our guest host, aei's arthur brooks. we've been kicking through all the numbers and expectations. hampton pearson joins us right
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now from the labor department. >> up 155,000. december nonfarm payrolls, increased by 155,000 jobs. the unemployment rate 7.8%. average hourly earnings, increasing 0.3%. we had revisions for november and october and the net increase of 14,000 jobs over what had previously been reported. private sector job growth in the month of december, a gain of 168,000 jobs. figures for the last 12 months, 2012 for the year, 1,835,000 nonfarm payroll jobs created for the calendar year, 1,903,000 of those in the private sector. december job growth, health care, up 45,000. food service and drinking places, plus 38,000. construction, an increase in 30,000. the biggest monthly increase in construction since february of 2011. manufacturing up 25,000. the biggest job losers, retail
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down 19,000. government employment down by 13,000. it turns out that we did get revisions in the household survey. what they showed was that unemployment was actually 1 tenth percent lower than reported in july but 0.1% higher than november. last month's revised unemployment rate was 7.8% thus the unchanged headline number today. >> all right, hampton, thank you very much. we are looking at the market reactions on some of these things. treasury bonds have been pairing some of their losses. you had seen the 1.95% just ahead of this number. we've also seen the dollar give back and is a little weaker on some of this news. you have not seen a major reaction in the equity market. the dow went down to up about 8. not major reactions on any of these moves right now. it's going to give people a lot of food for thought and a lot of things to dig through. let's get back to our panel for reaction. bob doll, jared bernstein, kelly
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evans, rick santelli and steve liesman map kelly, any thoughts on these numbers? >> you know, the average hourly earnings piece is interesting because we saw a big jump in november and that continued. we've often in these surveys had a strong month followed by a weak month. in the last couple of months, actually a much more consistent pace of job growth. >> was it up 0.2%? >> average hourly earnings up 0.3%. that followed a 4 cent increase the power month. we're still weak but there's more traction and more consistency with those reports. that's true in the headline figure, too. adding 15,000, almost right in line. >> that is average hourly earnings because that is usually a precursor before companies start adding additional employees. >> remember a little longer work week before they put other people on the fay roll. >> we're also heading into a year where we're going to see a hit to payroll to take home pay because of what just happened with the fiscal cliff. you want to see these increases, because that year over year is still weak.
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at least there's signs that's gaining some momentum. >> steve, how about your thoughts on that? >> i like the way that the adp guided the market to the right number without actually making a big mistake. it did cause them to ratchet up, remember adp is only forecasting the private sector. so the 168 is about the private sector is about in line with what the market was looking for. the problem is still seeing the government still losing jobs there. it may be good for some people. but overall that adds an effect, a drag on the economy. what was it, about 13,000 lost jobs? and i'm still looking for the unemployment rate to rise as a sign of a healthy jobs market. not necessarily fall. because i think that you'll have people come back into the workforce, and all of this affects what the fed said yesterday. this concept of the fed being, i guess, evenly divided between those that think they ought to stop qe in the middle of 2013 and those that think we ought to go all the way.
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big things for the market to think about. i don't think this number, caus unemployment rate remains pretty much unchanged, really gives -- decides the issue either way. >> if you want to take a look, rick, we mentioned very quickly some of the reactions. you have a much better sense for what's happening there? what's the biggest take away for the market? >> the market seems to be exactly okay with the okay as expected numbers. we see that there was volatility. you know, remember, we have a 197 several hours ago. that was the highest yield based on the closing basis since about the third week in april. so you see this eight-plus-month deals, and there's volatility. it was volatility in stocks. there's volatility in the dollar index. but not the kind of volatility i think that's going to give us any insight. this is what the market was expecting. i think the real issue that everybody's a little concerned about, that's long treasuries,
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is exactly how the masses of treasury positions, in addition to the holdings of the fed in treasury positions, is all going to make for a nervous adjustments, can it turn into more? you know, a drip can turn into a full-fledged bucket load if the nerves get a little more frayed. and i think that underscores a market where for 2 1/2 years many experts questioned the inflows of funds into the fixed income market. when i look at has going on, we are leading the way if you look at the spread between tens and booms, will this affect the safe harbor trade? will this affect the japanese holdings because they're in liquidation mode due to their demographics of their own fixed income holdings? so that's the way i think traders are looking. they're watching so closely the reaction of treasuries to every bit of data, especially this type of data. >> jared that is something we talked about this morning in the 6:00 a.m. hour.
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the statement that we have seen a bull market for the last three decades in bonds. and this is it. we have turned the corner, and it's the other direction from here. you agree with that? >> yeah, that sounds about right to me. i'll tell you, when i look at the numbers in this report, i actually think that there is something kind of good here. even though it's just very much expectations. and you know, nothing huge in terms of growth. which is that if you think about what's been going on behind me in that building and all the volatility in the markets and all the volatility in the political policy markets, the job market has been pretty steady as she goes. now, unfortunately, you know, we're stuck in an unemployment rate that's way too elevated and we need to do better than steady as she goes. but it's been very resilient to a lot of the uncertainty that people are talking about. i like the construction number. i like the manufacturing number. i thought kelly made a great point on earnings. with the payroll tax holiday expiring that's a 2% pay cut that everybody's -- >> but the numbers for december
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don't reflect that. that will be are flekted in the january -- >> none of the numbers will reflect that because these aall pretax numbers. my point is we've got to get the pretax earnings rising faster because the post-tax comes out of this. one thing for steve liesman and the economists, we are very much on the oaken rule line here. we have an economy that's growing trend, it seems to be generating jobs at trend. the unemployment rate stays where it is when you're doing that. >> yeah. you know, i'm kind of confused about the household numbers. workforce up 192. which is sort of what we thought, which is that more people entered the workforce. >> what's the rate? what's the rate? >> the rate's 7.8, right? >> no, no, i mean the labor participation rate. >> oh, that i don't -- that i don't have in this remote location, i don't have the all the data. >> 63.6.
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>> so that's up a tenth? >> if it is 63.6, that will be bang on what we saw in november. which was a low. >> unchanged. >> unchanged. okay. >> anyone want to -- >> you had a rise? >> that's my point i think we're just kind of on trend. >> you had an uncrease in the unemployment and an increase in the workforce and the employed only up by 28, so the internals on the household are not that dashing. the one thing that is good is the average hours worked up 34.5. a tenth. that's like adding workers. and that gets to what becky was talking about. you kind of you pay your folks a little more. and you give them a few more hours before you bring new people on. >> bob, i want your reaction to the market take on all of this. rick brought up the question about the bond market, where we see things going, this idea, have we terned the corner, are we no longer going to be in the bull market for bonds? >> the report verifies 2% growth as expected. i think the point about average
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hourly earnings has to be watched. because part of the reason profit margins have remained stubbornly high is i don't have to pay my workers more. that looks like it may be beginning to change. good sign for the economy and for consumption, not great news for profit margins. labor participation rate i'd like to see it moving up and it was flat. i think that's a mediocre report. on the bond market, that it hadn't happened before this is the surprise to me. we are healing slowly but surely. the systemic risk slowly is falling. here, europe and elsewhere. inflation may not be going up, but we're not in deflationary world so much anymore. so i think beyond yields will creep higher as time goes by. >> there's a major if here or a but, i should say, which is exactly this discussion we're having about the fiscal cliff and the debt ceiling. so here's bill blaine, the strategist overseas and i love getting the overseas perspective here because it's often just a straight, kind of what's it's take for the investor. he says yes the economy looks like it's recovering. we would expect bond yields to
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move higher. aside from the chances and joe this is just for you, of an insane technical default brought about by lunatic republicans. that's the worry here. is that as we're seeing all of these things fall into place, will we have a self-inflicted wound, a gunshot to the head? >> what about the lunatics that spent $16.4 trillion and want another check? aren't they the crazies? kelly? why are the lunatics the people that say, overspending and creating too much debt are lunatics. >> no, rick, you're -- >> no, no, no one's arguing about what you're saying rick, long-term. the worry is what happens this time around -- >> no, noef, no. that's a feeble excuse -- >> -- if you -- >> do you think that comment by that e-mail tweeter, do you think long-term, if you think that we have a congress that can't get their house in order, do you think you're ever going to be able to really worry about a long-term event and plan ahead? are you serious? >> no. >> do you think that our rulers,
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our rulers -- >> evidence of what you're saying happen, which is this kind of piecemeal approach -- >> childish. >> -- making those -- >> can i ask -- >> everyone would agree that's exactly what we need is to see that reform happen on the long end but it's not. >> what do you mean -- >> can i ask bill a question? >> -- lunatics that acknowledge it. >> i'd like to ask bill doll a question. if this point about bond markets and the bull being behind this is over, how do investors hedge against that? >> well, we know investors have huge positions in fixed income, and in treasuries included. of course, you got the fed owning all this paper, as well. the way they hedge against it is i think they buy some more equities which tend to be a pretty good hedge for inflation. and if you agree, we're healing. if you agree the economy is growing, okay. you know, i don't know where else you go, especially at these low multiples relative to interest rates and inflation.
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>> u.s. market or overseas market? because we had jim o'neil from goldman sachs who was saying he thinks the leadership kind of moves to some of the overseas markets? >> i agree. i think the multinationals do better here in the u.s. emerging markets do better. the rising of interest rates to flight off inflation is behind us, and we're beginning to see some pickup, trying to stop falling, i think they'll have a little better growth. i would have more overseas this year than last. >> which country in europe was -- >> british, i believe. >> i do like that rick, don't you? i love when the europeans look over here and call -- fiscal conservatives over here lunatics. that's my favorite thing. i'm surprised it wasn't from portugal or italy or spain. you know? >> or greece. >> or greece. >> greek guy would have been the best guy to have that. >> look, rick -- >> or italians about guns. >> rick's rant aside, this is an okay jobs report as folks are saying. at a period when you might have expected, you might have worried about something worse. and i very much agree with kelly
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and the tweeters point, that a self-inflicted wound -- >> you would. >> -- a self-inflicted -- a self-inflicted wound -- >> shots -- >> -- people -- >> rick -- >> one at a time. one at a time. >> the fiscal cliff was a little scratch on your hand compared to reaching the debt ceiling. that is a self-inflicted wound that is far, far deeper. >> we need to grow up. you need to be a man when you look at the debt. if it means uncomfortability, if it means going over -- >> man up on the debt. >> it means the government closing, my kids will thank me some day for it. >> yeah. i don't think so. >> thank you, everybody. >> yeah, well -- >> i'd like to see if you run your personal finances like that. >> yeah, personal finances aren't government finances, rick. >> thank you, everybody. >> i want to thank our panel for joining us. it was a good discussion. we really appreciate it. we look at the markets, and they are still kind of standing pat. this was what was expected at a
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jobs report. a number of 155,000 was right about in line with what people have been looking at. that's why you see the futures, again, have barely budged even after all this news. gives us a lot to think about and a lot to think about for next month. today the market not reacting much. >> we'll call it a spirited conversation. still to come on "squawk," we'll head down to the new york stock exchange, talk with jim cramer to see what he makes of the jobs r0r9. expectations for the trading session ahead and later steve liesman is going to hit down with st. louis fed president jim bullard at 1:00 p.m. eastern time. c'mon dad!
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down to the new york stock exchange with jim cramer is thinking about in terms of the jobs report or anything else that we've been talking about. jim, we had lamar -- we had so many people on and i said now in two months, we can't take two months off. we can't even take two weeks off. we're back in, you know, angst hell again worrying about what's finally going to happen. it's not going to be pretty, jim. >> no, it's not. look, i want to overlook it. i want to put it in a box. i want to be able to say that that is just, you know, not what you should focus on, because we've got earnings next week. i keep coming back to the ceos see what we see, joe, so they'll temper their enthusiasm. when you get that guidance that's not that positive, it's bingo. i listened to the family dollar call yesterday and there's the fiscal cliff and then talking about the debt wrangling in
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washington, and it's on people's minds. it's hard to get it off people's minds. and i know you had earlier about cars that was positive, and phil lebeau talks about cars that are positive but geez it's discouraging. >> i just wonder, jim, do you think that we need to get a handle on entitlements immediately? should that be what we do with the debt ceiling? or is it important to -- to raise another $600 billion in tax revenue immediately? >> no more tax revenue. none. >> but he's going to insist -- >> none. >> we just heard jared say he's going to insist on that. another $60 billion a year. >> just there shouldn't be. >> there should be no more tax increases. we should be coming up with a new way to be able to -- creative ways to be able to keep costs down on medicare. maybe make part "b" more expensive for people. but no. joe, no more taxes. i mean geez, read my lips no more taxes and don't go back on it. because everyone's going to get them. and everyone has sat down with
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their accountants in the last 48 hours is dazzled. dazzled about what's going to happen. and i'm not just talking about the wealthy people. because we're starting to talk about health care. small businesses. what they're thinking about at the end of 2013. so, no, i mean it's medicare, medicare and then medicare. and it's all that matters. discretionary spending is down to -- it's the lowest in 50 years. >> he just said 1.2 trillion we need to close, and they're going to -- he's going to call it balanced again. he's going to want to do 600 in spending cuts, and another 600 in revenue. that's what he's going to ask for. >> oh, yeah, national sales tax. i mean -- there's that -- >> close loopholes. i don't know. >> it's going to be the tax reform that we're supposed to like because it's nondiscretionary. it's going to be the stuff that if he had led with republicans would have said okay. but instead, he took the spoils of war in the first fight. >> and he first bite. >> he also said we're not talking --
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>> what do you think this comes in the form of corporate tax reform? >> it's medicare. it's just medicare. medicare is taking over this country. medicare is eliminating every bit of discretionary spending. if you only talk about medicare from now on, it would not be enough. that is the issue. >> jimbo, thanks. see you in a couple of minutes. >> all right. >> when we come back, a man many tv fans know as mcdreamy. managed to beat starbucks at its own game. squawk will be right back. she knows you like no one else. and you wouldn't have it any other way. but your erectile dysfunction - you know, that could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity.
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welcome back to "squawk box." futures right now following the report up to about nine points. 11 now. making headlines, actor patrick dempsey said it appears his bid to buy small coffee change tulley's has prevailed. it has 47 company owned locations in washington and california. after thursday's auction, a starbucks spokesperson explained they're in a backup position for some of tulley's assets and he
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won. a bankruptcy judge will have the final say on january 11th. i have never seen the show that he's in. i remember when he was younger, he was in like brat pack things and he did turn into a handsome man. >> i remember where he was riding away on a longhorn. >> did you dream about him? >> no. but he did grow up a bit. >> mcdreamy? what was he in? >> can't buy me love is the one i was trying to think of, where he plays a nerd. >> and he's on "grey's anatomy." >> have you been to a tulley's? >> i have. i've seen them out in washington. >> it's a great product. >> he's winning. meaning he's paying more than starbucks is willing to pay. what does that mean? >> starbucks thought they were going up small bucks. overpaying or it's more valuable to somebody who's not going to shut the chain down.
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>> which would be a pity. seattle's best turned into starbucks. we're going to take a quick break. we're going to give brooks the last word when squawk returns after this. this is a great country, yet we can't get our act together to avoid a short-term default let alone deal with the real crisis we have in terms of a long-term deficit. >> congress facing a critical deadline. we'll ask former new york governor george pataki about it. and future banking with the ceo of wells fargo. this is $100,000.
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we asked total strangers to watch it for us. thank you so much. i appreciate it. i'll be right back. they didn't take a dime. how much in fees does your bank take to watch your money? if your bank takes more money than a stranger,
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you need an ally. ally bank. your money needs an ally. the last word from our guest host, arthur brooks. a lot of themes in a lot of your books are conservatives and liber tar ylib er t liber tar yans. when you can have someone come on, and refer to lunatic republicans as if it's agreed to by everyone, you see you're losing the -- when the